Tether (USDT) is one of the most popular and widely used cryptocurrencies. Not only is it the largest stablecoin, but it’s also ranked third by market capitalization, only topped by BTC and ETH. Moreover, it is the largest crypto by daily volume, with twice as much value traded as Bitcoin.
USDT was launched in 2014 by Tether Limited. To this day, the company manages the reserves and emission rates of USDT. It was initially called Realcoin and was founded by Brock Pierce, Craig Sellars, and Reeve Collins. It has been linked to the exchange Bitfinex since its inception, and both companies allegedly share officials. Besides USDT, Tether Limited also issues stablecoin for the euro (EURT), Chinese yuan (CNHT), Mexican pesos (MXNT), and Tether gold (XAUT).
It has been subject to investigations about the transparency of their backing, but they are open about their reserves. The company uses its website to update the status of its reserves daily. Given its predominance in the crypto markets, it’s a good decision to buy USDT to participate in decentralized finance.
How Does Tether Work?
Tether became so prevalent in the crypto market because cryptocurrencies are highly volatile, despite the great investment opportunities they offer. This can be beneficial, though, since fast increases in price bring great yields. But it can also be detrimental to your budget, as the price plummets. For the latter, USDT gives investors a way to save their earnings in a token pegged to fiat currencies, without actually trading them for fiat. Tether was the first to introduce this concept, which would later be replicated by other companies to issue new stablecoins.
To maintain the fiat-token peg, Tether Limited holds the reserves for every USDT issued and only issues new tokens by request. To get new USDT, customers must complete the Tether Issuance process — a strategically planned procedure consisting of four stages. However, traders can also get USDT using crypto exchanges, instead of requesting them from Tether Limited. The USDT tokens were initially minted on the Omni Layer, a protocol to create tokens on the Bitcoin blockchain. But thanks to its widespread adoption, there are now versions of USDT on other blockchains. Besides, Bitcoin, there is USDT on Ethereum, EOS, Polygon, Solana, Avalanche, Algorand, and other crypto projects mainly focused on DeFi protocols. To store the USDT tokens, it’s important to know which version you own because you need to use a compatible Tether wallet.
What Are the Main Pros of Tether?
USDT, and stablecoins in general, are great financial tools in the crypto ecosystem. That’s the reason it was so promptly adopted. Let’s discuss some of the main pros of Tether.
Stability
Tether is called a stablecoin because its price is pegged to a fiat currency. While offer and demand affect the price of Bitcoin and other cryptocurrencies, 1 USDT will always be worth $1. There have been times when USDT has lost its peg, but supply management quickly brings it back to its stable price.
Liquidity
USDT is one of the most liquid crypto assets in the market. As we said, it has the highest daily trading volume, so it’s quite easy to either buy or sell it, even more than Bitcoin or Ethereum.
Accessibility
Since USDT is available in 8 different chains, it’s accessible to any trader, in any DeFi ecosystem. Moreover, the compatible chains are among the top traded. The version with the highest volume is ERC-20, on the Ethereum blockchain, the second largest by market value.
Transparency
Tether’s value and reliability come from the fact that its reserves are published daily, across all the compatible chains. The official website of Tether Limited releases daily reports of the reserves not only of USDT but also EURT and the other stablecoins in their ecosystem.
How to Use Tether?
The main benefit of Tether is the ability to use a fiat-like currency without leaving the crypto market. For example, if a trader is invested in Bitcoin or any other volatile crypto asset, they could trade their BTC for USDT in bear markets to avoid losses. This way, their gains are safe in a stable store of value, but they don’t have to sell it for fiat. This usually takes some time in most centralized exchanges, and in the crypto market, time is money.
The same procedure can be used for short selling strategies. A trader could borrow a certain asset, sell it for USDT, and then buy back when the asset lowers its price. In general, USDT is a great tool for DeFi protocols, as it’s a stable asset that exists within the same platforms, and trades can be performed immediately.
The introduction of Tether to the crypto ecosystem gave the markets a boost, and that’s why it became so popular in a short time. Investing in coins and tokens was already a profitable investment. However, the time it took to withdraw from exchanges, and the liquidity issues that could arise during bear markets, posed a risk that not all traders wanted to take. Tether Limited has had its fair share of criticism. But the company has known how to adapt to these challenges, and that’s why USDT plays such a major role in today’s crypto market. There are other competitors, such as USDC or DAI, but none of them gets even half of the trading volume USDT does.
